Ibero-American News Digest

Kirchner: Argentina Is Reindustrializing Under a New Paradigm

In a two-and-a-half-hour speech opening the new session of Congress on March 1, Argentine President Nestor Kirchner reviewed Argentina's march out of the hell into which the IMF policy of the 1990s had sunk it, by adopting a different paradigm, in which the success of public policy "must be judged from the standpoint of the common good" and "the carrying out of public policy for the benefit of the well-being of the people."

An abyss divides those who insist that Argentina must return to the "canned recipes" of the IMF, and our government, Kirchner said. What they propose we implement, are the policies which threw 60% of our people into poverty and 30% into indigence; their deflationary policy was "the silence or the peace of the cemetery" where people could not consume, develop, or have upward mobility. "We want a live society," he countered.

Do they think we Argentines have no memory of history, when they criticize my government for daring to break ranks? We were not the ones who wished to turn Argentina into a country of services, who did not invest in energy or public works. We and the majority of Argentines "dreamed of creating a productive country, an industrial country."

One of the big challenges we face in state policy, is to go back to a policy of investing in public works. Given infrastructure's "power to improve the quality of life, to rapidly drive the level of activity, and generate better economic and social competitiveness," this is a priority for us. We have had to fight in the field of ideas, also, he said. "We have had to fight against a way of thinking very deep-rooted in certain sectors, that active policies vis-a-vis infrastructure and public works are an expense, and not investment."

Among the advances Kirchner cited as having been made under the new paradigm, were a drop in the percentage of Argentines who live under the poverty line, from 60% when he took office in May 2003, to 31.8% today: "shameful," but far less; and unemployment below 10% for the first time in 14 years, at 8.7%—a third of the 27% it was in May 2003.

Correa Declares Infrastructure Emergency

Declaring his country's productive sector to be in a "state of emergency," Ecuadoran President Rafael Correa signed a decree Feb. 26 allocating $100 million to finance infrastructure projects to jump-start the economy. Speaking on his weekly radio show Feb. 24, Correa explained that the money, which comes from a special reserve fund of oil revenue, will be directed to Ecuador's Army Corps of Engineers to either finish, or develop, projects which the productive sector requires for its activities, such as repairing harbors, jetties, bridges and secondary roads in need of repair and maintenance.

Why give our resources to other sectors, when we have an Army Corps of Engineers, which, with all their honesty, determination, and patriotism, can help rebuild the nation, he asked.

While discussing financing, Correa also said he expected the newly created Bank of the South (see last week's InDepth: "Bush Biofuel Junket to Ibero-America Aims To Ensnare Region in Insanity," by Cynthia R. Rush) to be up and running within 120 days. This will "dramatically lower" the cost of financing for projects. This stands in stark contrast to the IMF, he said, whose loans may have interests rates of 3 to 4%, but by demanding "unacceptable conditions, imposing consultants, things we have to buy, ... fines, etc., they end up much more costly than commercial credit."

Advisor of 1987 Debt Moratorium To Represent Brazil at IMF

On Feb. 23, Brazilian Finance Minister Guido Mantega named Paulo Nogueira Batista as Brazil's representative on the IMF Executive Board. As such, he will head a group of nine South American and Caribbean countries. "I will be [at the IMF] as an ambassador, to defend the interests of these nine countries, and not the interests of the IMF," he declared.

Nogueira Batista's appointment has caused quite a stir, as he is a nationalist who became notorious in bankers' circles as the debt advisor for Finance Minister Dilson Funaro in 1986-1987, when Funaro declared a debt moratorium. Since then, Nogueira Batista has consistently fought against globalization, dollarization, and privatization, as threats to Brazil's sovereignty.

Questioned as to why he agreed to represent the Lula da Silva government when he had been an outspoken critic of the monetarist policies of the President's first term, Nogueira Batista answered that his appointment was merely a small part of a greater change. He pointed to the Accelerated Growth Program (PAC) announced a month ago, as evidence that Lula's second term will focus on achieving growth.

Interestingly, the Brazilian daily Valor Economico implied on Feb. 26, that Nogueira Batista had been considered to head of the Central Bank, which, the paper noted, would have blown out hedge funds' bets that Brazil will never break with the carry trade.

Brazil: Carrion for the Carry Trade

Brazil's public debt, when converted to dollars, has grown at an annual rate of over 20% over the last four-plus years. It stood at $228 billion in September 2002, and had risen to $499 billion by the end of December 2006. The Brazilian government pays the highest interest rate in the world on its public debt: now 13%.

During this same time interval, the Brazilian Central Bank's dollar reserves nearly tripled, from $37.6 billion in August 2002, to $101.1 billion in February 2007—an annual rate of increase of 25%. In other words, the government was pumping out huge volumes of debt, at 13% interest or more, which is being bought up by international hedge funds and other speculators, in exchange for dollars that just sit as Central Bank reserves, which are deposited back in Wall Street and other banks, earning perhaps 5% interest. The 8% margin is pure speculative usury to the benefit of the hedge funds ... and pure looting of the Brazilian nation and people.

Testifying before a Senate committee on Feb. 27, Brazilian Central Bank chief Henrique Meirelles insisted that Brazil would continue to play its role of providing foreign speculators with Brazilian public debt paying usurious interest rates. Meirelles piously claimed his policy of issuing debt to buy dollars is necessary to increase Brazil's foreign reserves, to cover its obligations in the event of a financial crisis. This is not surprising, however, given that Meirelles, before taking over the Central Bank, had worked abroad for years as a top executive in BankBoston Corporation.

Chile Forms Committee To Study Nuclear Power

President Michelle Bachelet has formed a committee of experts to evaluate the prospects for Chile to develop nuclear power in the future, Energy and Mines Minister Karen Poniachik announced Feb. 28. The committee has six months, starting in March, to issue recommendations on what role, if any, nuclear power should play over the long term in the Chilean economy. The minister was careful to emphasize that the government does not view nuclear as part of any short-term solution to the nation's energy crisis, but the anti-nuke lobby is already screeching, as it is the first time nuclear energy has been put officially on the table for discussion.

Private Sector Fuels Biofools Alliance

The private sectors of Brazil and the U.S. are collaborating closely to build a biofuel alliance between the two nations, on the assumption that the Bush Administration's refusal to lower tariffs for imported Brazilian ethanol may slow the pace of the more official government-to-government cooperation.

Former Florida governor and Presidential sibling Jeb Bush is in the middle of this, as founder of the Inter-American Ethanol Commission and also as a key player on the "Ethanol General Staff" that the White House has set up to supervise agreements with Brazil. Also involved is the private sector's U.S.-Brazil Business Council. Among these groupings, there is also talk of creating a strategic ethanol reserve, similar to the U.S.'s Strategic Petroleum Reserve.

Former Brazilian Agriculture Minister and co-founder of Jeb Bush's commission, Roberto Rodrigues, told Valor online Feb. 23 that the private sector alliance will be key in getting other nations to start producing ethanol, even when they have no tradition of doing so. As a service to foreign private investors, by March or April, Rodrigues expects to have a complete mapping of every country in region indicating the most potentially lucrative targets.